Pharmacy Benefits Uncut

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When it comes to words that are overused in healthcare, innovation likely ranks right up there with value.

But what do we really mean when we describe a new drug as “innovative”?

Every day, you probably hear about some “innovative” drug or another being developed or approved by the FDA. And as you’re no doubt aware, these innovative drugs are almost always associated with extortionate 6- or 7-figure price tags.

In a healthcare world obsessed with innovation, you need to understand what constitutes a truly innovative drug therapy and how to evaluate it.

The Allure of Innovation

Since the introduction of the 2012 US FDA Safety and Innovation Act, the FDA can designate a drug as a “Breakthrough” therapy if it “treats a serious or life-threatening condition” and “may demonstrate a substantial improvement…over available therapies” based on preliminary evidence.

Many of the drugs that receive the Breakthrough designation are approved through the FDA’s accelerated approval processes, meaning the evidence of their effectiveness is uncertain. Furthermore, many of these breakthrough drugs lack confirmatory trials to demonstrate their benefit.

Studies, however, have shown both lay people and physicians believe drugs designated as Breakthroughs are more effective than those meeting the breakthrough criteria for approval but not receiving this designation. Studies have also shown physicians often misunderstand the FDA approval process and many of them overestimate the strength of evidence required for drugs to receive the Breakthrough designation.

All of this suggests we place a huge value on innovation: we want novel drug therapies and we’re willing to pay a premium for them. After all, the median list price of new drugs approved by the FDA in 2023 was $300,000.

And yet we’re not exactly sure how to define innovation.

The Peril of Not Knowing Better

When you don't know what innovation really means and how to value it, you’re at risk of paying big money for drugs that may not actually work.

When you believe superlatives like "breakthrough" or “promising” your decisions may be biased. You’re likely to overlook evidence that a drug may not actually work as well as it’s purported to. You’re also likely to more favourably interpret evidence of its effectiveness.

Take Oxbryta, for example. This drug received accelerated approval and was granted a Breakthrough designation by the FDA in November 2019 for the treatment of sickle cell disease (SCD). SCD is an inherited blood disorder affecting the shape of red blood cells, which leads to acute painful episodes called vaso-occlusive crises. The goal of SCD treatments is to reduce the frequency of these episodes. The FDA approved Oxbryta because it led to an increase in hemoglobin (the iron-containing protein in red blood cells), which is a surrogate outcome. It’s list price was $125,000/year.

Fast forward 5 years and the Oxbryta was pulled off the market worldwide. Turns out it increased the risk of death and complications in SCD patients. The manufacturer concluded, based on this evidence, that its benefits didn’t in fact outweigh its risks.

Despite its Breakthrough designation, Oxbryta wasn’t an innovative therapy after all.

Innovation and Health Equity

Pursuing innovative drug therapies may lead to reimbursement of high-cost drugs that aren’t effective, a situation that creates health equity implications.

Of course, you as an employer don’t have a bottomless barrel of money to pay for your plan members’ prescription drugs. So when you provide access to expensive new drug therapies with uncertain benefits, you’re forced to make trade-offs. These trade-offs often take the form of premium increases or higher deductibles and out-of-pocket costs for your plan members in return for access to these new drugs, which could create or exacerbate existing health inequities.

As you’re likely aware, these inequities very often lead to a deterioration in your plan members’ health which ultimately increases total healthcare costs for everyone. You need to understand the real-life equity consequences of providing access to ‘innovative’ therapies for your plan members’ so that you can make fair, justifiable decisions about reimbursement of these drug therapies.

Practical Strategies

Balancing the competing objectives of providing fair access to high-cost new drug therapies that may or may not improve your plan members’ health and ensuring the sustainability of your pharmacy benefits plan is no easy feat and there’s no one-size-fits-all solution. But there are a few things you can do to navigate this issue in a fair and systematic way:

1) Be skeptical – don’t buy the hype around the terms “breakthrough”, “innovative”, or “promising”. Evaluate the evidence of a drug's effectiveness in an unbiased way and use this evaluation to inform your decisions. Evidence will continue to emerge for drugs that receive accelerated approval by the FDA and you need a system in place to continually evaluate this new evidence as it becomes available.

2) Consider the consequences – making decisions about drugs with six- and seven-figure price tags will inevitably have health equity-related consequences for you and your plan members. You need to explicitly consider these effects and integrate them into your decision-making processes.

3) Aim for value – because we’re uncertain about the effectiveness of many new expensive drugs, you could potentially be paying for therapies that ultimately don’t improve your plan members’ health. Consider risk-sharing agreements with manufacturers to offset high prices and clinical uncertainty (e.g. price discounts or future reimbursement of drug costs for therapies found to be ineffective).

The Bottom Line

The last decade has seen a growing number of drugs approved through the FDA’s accelerated pathways, with about one quarter of them designated as Breakthroughs, despite uncertain evidence about their effectiveness. During this time, there’s also been an uptick in FDA approved therapies being withdrawn from the market because they’ve failed in confirmatory studies. This is a difficult, complex pharmacy benefits landscape for employers to navigate and we need a practical, comprehensive solution to address stratospheric prescription drug prices. But we’re not there yet.

In the meantime, when deciding whether and how to reimburse these drugs for your plan members focus on three things: objectively assessing the evidence, understanding the equity implications, and offsetting the financial risks.

Finally, here’s the most important point to keep in mind: for a drug to be truly innovative it needs to improve a patient’s health over and above currently available therapies.

And that's all for today.

See you in two weeks,

Nina

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Pharmacy Benefits Uncut is produced by Healthcare Decision Making, a consultancy that helps small and medium sized employers optimize their pharmacy benefits plan. We offer a comprehensive range of services focused on three areas: PBM procurement, ongoing management of your pharmacy benefits plan, and self-policing and oversight of your pharmacy spend. To learn more about how Healthcare Decision Making can help you, email Nina Lathia at nina.lathia@healthcaredecisionmaking.com

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